SEBI Chairman U K Sinha said that uninformed investors should enter the market only through pension funds and mutual funds. He was speaking at an event held in Mumbai recently.
The SEBI chief said that uninformed investors are let down when they see negative returns by entering the market directly. “That’s the nature of the beast. It has to go down. Nobody can assure that the price at what you invest today will always go up. One has to hold investments for a long time,” pointed out Sinha.
He made a case for retail investors to invest through informed investors like in mutual funds by pointing out the superior fund performance of mutual funds. “As on September 2015, 90% of equity mutual fund assets (over three and five year period) have outperformed the benchmarks. There is difference between a retail investor directly investing in markets and through mutual funds,” said the SEBI chief.
Sinha said that he is not disappointed with the poor retail response to recent IPOs. “I don’t mind if retail don’t participate in IPOs. I would rather like them to enter through institutional investors.”
Further, Sinha said that he is happy to see Employees’ Provident Fund Organization (EPFO) investing in markets. “Realizing that a large number of foreign pension funds have taken the opportunity of entering India, EPFO has now decided to invest 5% of incremental deposits in markets,” he said.
